Here's our summary of key events overnight that affect New Zealand, with news that 'me-first' policy making is struggling to put runs on the board.
First in the US, retail sales recorded their biggest drop in more than nine years in December, down -1.2%, as sales fell across the board, suggesting a sharp slowdown in economic activity at the end of 2018. This is a big surprise because markets had expected a small rise. And it might be worse than it looks as well; only strong car sales kept it from being a larger drop. Year-on-year, retail sales rose +2.1% higher than December 2017. The Fed noticed; and so did bond markets.
Markets in Europe reacted badly to the news, ending their day down about -0.5%. Wall Street reacted negatively as well, but in early afternoon trade has clawed its way back to nearly even for the day. Yesterday, in Asia, markets recorded little change; but in New Zealand and Australia market indexes declined -0.5% and -0.1% respectively.
In China, goods exports rose +9.1% year-on-year to US$218 bln in January, while imports slipped -1.5% to US$178 bln, with their overall merchandise trade surplus more than doubling from a year earlier. Although an impressive result, some of it might actually be related to when the Chinese New Year shutdown fell. But despite the overall decline, imports of natural gas hit a record high in January, increasing 27% above the same month a year ago. Another trade 'win' for Australia.
In their trade negotiations, there are now reports that the US is considering pushing back the deadline for imposition of higher tariffs on Chinese imports by 60 days to the end of April. This suggests they are still miles from an agreement, despite the soothing official statements.
And Fitch is pointing out how capricious US steel tariff policy is; apparently the US grants so many exemptions to Chinese steel producers they aren't feeling any effects. Not so American allies. This may help explain why the Chinese steel mills are buying so much Australian iron ore and coal, and at high prices. It may also explain why the Chinese can't get on top of their pollution problems.
In Europe, Airbus has announced that it will end production of its A380 white-elephant aircraft after Emirates Airlines cut most of its orders.
Yesterday we reported that the EU has broadened its blacklist of countries that encourage money laundering. Some of those include friends of the US and today the Trump Administration told US banks they can ignore the EU list. Apparently sanctions are only 'real' if the US imposes them. The EU list threatens American tax dodging.
And speaking of dodging the tax law, in Australia there are reports that their competition authorities are investigating the big four accounting firms for collusion after a secret dinner meeting between their CEO's was revealed. This involves Deloitte, KPMG, EY and PwC.
The UST 10yr yield is softer by -3 bps today following the US retail miss, now at 2.67%. Their 2-10 curve is now just under -16 bps. The Australian Govt. 10yr yield has dropped -6 bps to 2.10%. The China Govt. 10yr yield is little-changed at 3.10%, while the New Zealand Govt. 10yr yield is up again, up another +4 bps at 2.25%.
Gold is little-changed at US$1,311/oz.
US oil prices are up again today to just under US$54.50/bbl while the Brent benchmark is just under US$64.50/bbl.
The Kiwi dollar is firm again today, now at 68.3 USc. On the cross rates we are even higher at 96.3 AUc which is its highest in more than two years, and at 60.5 euro cents. We are also at a 2018 high against the British pound. That pushes the TWI-5 back up over 73.
Bitcoin is virtually unchanged at US$3,568. This rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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